THE CONTRIBUTORY ROLE OF NIGERIAN DEPOSIT INSURANCE CORPORATION IN ECONOMIC GROWTH IN NIGERIA

THE CONTRIBUTORY ROLE OF NIGERIAN DEPOSIT INSURANCE CORPORATION IN ECONOMIC GROWTH IN NIGERIA (ECONOMICS PROJECT TOPICS AND MATERIALS)

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

A bank deposit insurance scheme (DIS) is a financial guarantee to depositor particularly the small ones, in the event of a bank failure bank deposit insurance scheme developed out of the need to protect depositor, especially the uniformed, from the risk of loss and to also protect the banking system from instability occasioned by runs and loss of confidence The banking system has been singled out for this special protection because of the vital role banks play in the economy whether developed or developing. For a DIS to be effective in achieving the above objectives. It must be properly designed, well implemented by the fancy established to execute the scheme and well understood by members of the public {financial stability forum (FSF), 200}. A well designed DIS contributes to the stability of withdraw their insured deposits from banks following rumours about their financial conditions.

The establishment of Nigerian deposit insurance cooperation (NDIC) in 1988 heralded the introduction of an explicit deposit insurance scheme in Nigeria the Nigerian deposit insurance corporation is responsible for insuring the deposits at all banks and other deposit taking financial institutions licensed by the central bank of Nigeria (CBN). It also give financial and technical assistance in the interest of depositors, to banks in difficulties and in case a bank fails, it guarantee the payment of insured deposits

The corporation assists the central bank of Nigeria (CBN) in the formulation and implementation of banking policies, with a view to ensuring sound banking practice among others. The scheme was meant to argument the existing safely not by protecting depositor, thereby boosting confidence of the banking public. It was also considered as an additional frame work to serve as a substitute to the government support policy (implicit insurance) hitherto in place. Prior to the establishment of the corporation, government was unwilling to let any bank fail no matter its financial condition due to fear of the potential adverse government support over the years. However, such direct supports (implicit insurance) could not be sustained under the structural adjustment programmed introduced in 1986 which among others, deregulated the economy towards market orientation, with the establishment of the Nigerian Deposit insurance corporation scheme (NDIC), the pain of bank failure unsuitable in a market environment were reduced to a minimum while moral hazard associated with direct government support was eliminated.

THE CONTRIBUTORY ROLE OF NIGERIAN DEPOSIT INSURANCE CORPORATION IN ECONOMIC GROWTH IN NIGERIA (ECONOMICS PROJECT TOPICS AND MATERIALS)